Godrej Properties to raise Rs1,500 crore by selling office assets

Godrej Properties plans to use the funds raised from its office assets sale to pare debt


Godrej Properties executive chairman Pirojsha Godrej says the real estate firm still owns 20% in Godrej BKC in Mumbai, whose sale can generate around Rs1,000 crore. Photo: Aniruddha Chowdhury/Mint
Godrej Properties executive chairman Pirojsha Godrej says the real estate firm still owns 20% in Godrej BKC in Mumbai, whose sale can generate around Rs1,000 crore. Photo: Aniruddha Chowdhury/Mint

Bengaluru: Godrej Properties Ltd (GPL) plans to sell some of its office assets to raise around Rs1500 crore, a significant portion of which would be used to pare debt.

The Mumbai-based developer has been among the country’s best developers in terms of sales and delivery even during the prolonged slowdown, and is on an acquisition spree when many developers have sold projects and not launched anything new.

GPL’s net debt increased by Rs270 crore on a sequential basis to Rs3,270 crore in the October-December quarter due to land and approval related cash outflows, according to a February report by Edelweiss Securities Ltd.

In September 2015, GPL sold 435,000 sq. ft in its Godrej BKC tower in Mumbai’s Bandra-Kurla Complex to pharmaceutical firm Abbott India Ltd for Rs1,479 crore. The latter plans to set up its corporate office here.

Godrej BKC has around 1.3 million sq. ft of saleable area and is being developed by GPL in partnership with Jet Airways (India) Ltd.

“We want to bring down debt. We still have around 20% space that is unsold in the BKC project which will generate around Rs1,000 crore and we are in talks with companies to sell that,” said Pirojsha Godrej, executive chairman, Godrej Properties.

GPL has two more office projects in Kolkata and Chandigarh, which it intends to sell and raise capital, he said.

It will build new office space in Vikhroli, where its flagship mixed-use project The Trees is located besides the Godrej group headquarters.

The company’s business model, based on a non-capital intensive strategy that it has adopted over the past five years or so, has helped it benefit from the sluggish conditions in the sector.

GPL signed on seven new projects—in Greater Noida, Bengaluru and Pune—in 2016-17, that were a mix of joint development agreements and outright land buys.

Three of the acquisitions were made from Godrej Residential Investment Program II (GRIP-II), a pool of around $275 million that was raised in March 2016 to invest in residential projects, from a clutch of investors with Dutch pension fund asset manager APG Asset Management NV as the lead investor. Last year, GPL also launched three new projects in Bengaluru, Mumbai and Noida apart from five new phases that were launched within existing projects. This year, it may launch as many projects in the first quarter (June quarter) alone.

“The pace of launches could definitely be faster. There are lots of opportunities and it’s a good time to strengthen our portfolio and be counter-cyclical. We would like to launch a new project in each core property market, every quarter, which is still some time away but that’s where we are heading,” said Godrej.

GPL posted a nearly four-fold jump in its net profit for the third quarter ended December to Rs77.25 crore from the corresponding period a year ago, backed by strong sales. Its total income doubled to Rs518.25 crore in the quarter from Rs247.24 crore in the year-ago quarter.

In the December quarter, it sold over 600,000 sq. ft worth over Rs300 crore on the first day of launch of Godrej Golf Links in Greater Noida and over 300 apartments within two months of launch at Godrej Greens in Pune. Both projects were launched in November 2016.

The real estate market has undergone a fair amount of consolidation and that is expected to continue, with smaller and mid-sized developers struggling to operate in a tough environment.

“We are sure of what we are doing. We are working on our (project) execution to improve it further, but the strategic focus will be to carry an asset-light model and make outright acquisitions selectively,” he said.

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